Mrs. Leila Seth, J.
1. The interpretation and scope of s. 52(2) of the I.T. Act, 1961 (to be referred to in brief as 'the Act'), is the matter in issue in this reference, at the instances of the Addl. Commissioner of Income-tax. The question of law referred for out opinion under s. 256(1) of the Act i :
'Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the provisions of sub-section (2) of sections 52 were not applicable in the instant case as the difference between the market value and the real consideration of 6/7 the portion of the property at 28A, Prithvi Raj Road, New Delhi, was charged to gift-tax ?'
2. The assessed, Mrs. Avtar Mohan Singh, owned several properties in her individual status. Amongst these was a bungalow at 28, Prithvi Raj Road, New Delhi. During the previous year which ended on March 31, 1964, the relevant assessment year being 1964-65, she transferred a 6/7the share of this property to here three sons for a consideration of Rs. 3,60,000. However, the market value of this property according to her wealth-tax records was rupees five lakhs.
3. The GTO levied a gift-tax on this transaction. The difference between the sale price shown in the deed of September 21, 1963, and the market value was treated as a gift. The market value of 6/7ths portion of the bungalow was eventually determined at Rs. 4,28,571 and gift-tax imposed. But the ITO, while competing the I.T. assessment of the assessed, also sought to tax the difference between Rs. 4,28,571 and Rs. 3,60,000 as capital gains. As the difference between the market value and the consideration declared was Rs. 68,571, which exceeded 15 per cent of the declared consideration, the ITO invoked the provisions of s. 52(2) of the Act and obtained the approval of the IAC. As such, he held it was not necessary to establish that the transfer had been effected with the object of avoiding liability under s. 45 of the Act.
4. The ITO also added an amount of Rs. 32,143, as the difference in sale price and market valuation as on January 1, 1954; taking the property appreciation to be more or less at a uniform rate, the transferred portion of the property was valued at Rs. 3,27,854 on January 1, 1954. The total capital gains were, thereforee, computed at Rs. 68,571 plus Rs. 32,143 amounting to Rs. 1,00,714.
5. The assessed appealed to AAC. He held that the transaction in question was a combined transaction of sale and gifts, the part which constituted sale being distinct from the gift, the gift being a gift in the ordinary accepted sense. He, thereforee, declared the addition of Rs. 68,571 on the ground that s. 52(1) could not be invoked in view of s. 47(iii) of the Act. He also reduced the addition of Rs. 32,143 by Rs. 12,643 as he determined the market value of the property at Rs. 3,40,500 on January 1, 1954.
6. The department thereupon appealed to the I.T. Appellate Tribunal. The revenue contended that in order to attract the provisions of s. 52(2) of the Act, it was not necessary to establish that the transfer was for purposes of avoidance of tax; what was required to be proved was only that the market price exceeded the amount of consideration by 15 per cent; further, the provision in s. 47(ii) excluding a gift from capital gains, was not applicable as it did not apply to deemed gifts; and as such, the amount of Rs. 68,571 was correctly treated as capital gains.
7. The Tribunal upheld the order of the AAC mainly relying on the decision of the Kerala High Court in K. P. Varghese v. ITO : 77ITR719(Ker) . However, it clarified that for the purposes of the present appeal, it was not necessary to hold that s. 52(2) would be attracted only in cases of understatement. Assuming it applied to bona fide transaction, the Tribunal held that s. 52(2) would not apply when the transaction was a gift in view of s. 47(iii) of the Act. Relying on the above mentioned decision of the Kerala High Court, the Tribunal held that as the I.T. Act and the G.T. Act are parts of an integrated system of taxation, it would be fair and proper to construe the meaning of 'gift' as per the definition in the G.T. Act, since it is not defined in the I.T. Act. In any case, the scheme of capital gains as set out in ss. 45 to 55 of the Act excluded certain categories of transaction from its ambit. These are, inter alia, distribution of capital assets on the partition of a Hindu family or on the dissolution of a firm; transfer of a capital asset by a company to its subsidiary or under a scheme of amalgamation; transfer of a capital assets under a gift or a will or an irrevocable trust. The Tribunal, thereforee, held that since the transaction resulted in a charge of gift-tax it could not also result on a charge of capital gains tax.
8. In this court, Mr. Madan Lokur, learned counsel for the revenue, submitted that the question of bona fides of the transaction was irrelevant for the purposes of s. 52(2) of the Act. Once the ITO was of the opinion that the fair market value of the capital asset on the dated of the transfer exceeded the full value of the consideration declared by the assessed in respect of the transfer by more than 15 per cent. Of the value so declared, the full value of the consideration with the previous approval of the IAC must be taken to be the fair market value and assessed to capital gains accordingly. Learned counsel also pointed out that the decision of the Kerala High Court in K. P. Varghese's case  77 ITR 719, on which the Tribunal had relied, has since been overruled by a Full Bench of that court ( 91 ITR 49). In the alternative, counsel submitted that the deemed gift is not includible in the expression 'gift' in s. 47(iii) of the Act and as such not excluded from the purview of capital gains. It was not proper to use the definition of gift in the G.T. Act for the purpose of the I.T. Act.
9. Mr. Monga, learned counsel on behalf of the assessed, urged that the provision of s. 52(2) of the Act would be attracted in a case only if an understatement had been made with the object of avoidance of tax. As this was a bona fide transaction and no case of understatement had been established, capital gains tax was not leviable. Further, the difference had been treated as a gifts and tax imposed and in the light of s. 47(iii) it was exempt. A decision of this court in Shiv Shankar Lal v. CIT : 94ITR433(Delhi) was relied on and stated to be binding.
10. Mr. Madan Lokur then submitted that the decision in Shiv Shankar Lal's case was not binding on this court as the observations were obiter. The question did not really arise as the property was held to be agricultural and so outside the scope of capital gains.
11. Before adverting to the decision abovementioned, as also a number of others which were cited, it is necessary to examined the relevant provisions of the Acts, of the proper appreciation of the points in issue.
12. Chapter IV of the Act deal with capital gains. Section 45 provides that any profits or gains arising from the transfer of a capital asset shall be chargeable to income-tax under the head 'Capital gains' except as otherwise provided. Section 46 deals with capital gains on a distribution of assets by companies in liquidation. Section 47 sets out these transaction which are not to be regarded as transfer for the purposes of capital gains. The provisions with which we are concerned is in sub-s (ii) and is as follow :
'47. Nothing contained in section 45 shall apply to the following transfers -...
(iii) any transfer of a capital asset under a gift or will or an irrevocable trust.'
Section 48 lays down the mode of computation of capital gains and s. 49 refers to how the cost is to be ascertained in the cases of certain modes of acquisition. Section 50 deals specially with the computation of the case of acquisition of a depreciable assets and s. 51 deals with the effect of advance money received. Then comes s. 52, the interpretation of which is under consideration in this reference. The marginal note or heading of this section state : 'Consideration for transfer in cases of understatement.'
13. The section read :
'52. (1) Where the person who acquires a capital asset from an assessed is directly or indirectly connected with the assessed and the Income-tax Officer had reasons to believe that the transfer was effected with the object of avoidance or reduction of the liability of the assessed under the section 45, the full value of the consideration for the transfer shall with the previous approval of the Inspecting Assistant Commissioner be taken to be the fair market value of the capital asset on the date of the transfer.
(2) Without prejudice to the provisions of sub-section (1), if in the opinion of the Income-tax Officer the fair market value of a capital asset transferred by an assessed as on the date of the transfer exceed the full value of the consideration declared by the assessed in respect of the transfer of such capital asset by an amount of not less than fifteen per cent. Of the value so declared, the full value of the consideration for such capital asset shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to the fair market value on the date of its transfer.'
14. Sub-section (2) was inserted by the Finance Act of 1964, with effect from April 1, 1964. A proviso was added by the Finance Act of 1975, with effect from April 1, 1974, which has not been set out as it is not relevant for the present case.
15. Sections 53, 54, 54B and 54D of the Act pertain to certain exemptions which are not relevant. Section 55 deal with adjusted cost of improvement and acquisition and s. 55A (which was added w.e.f. 1-1-73), provides for a reference to a Valuation Officer to ascertain the fair market value and is also of no relevance to the point at issue here.
16. Section 2(14) of the Act defines capital asset and s. 2(22A) defines fair market value. Section 2(24) which defines income provides in cl (vi) that income includes any capital gains chargeable under s. 45. Section 14 of the Act which classifies income under certain heads for the purposes of charge and computation sets out 'Capital gains' as a head in s. 14F.
17. Gift was not been defines in the Act but has been defined in the G.T. Act, 1958. Section 2(xii) read :
''Gift' means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or moneys worth, and includes the transfer or conversion of any property referred to in section 4, deemed to be a gifts under that section.'
18. Section 4(a) provide :
'Where property is transfer otherwise than for adequate consideration, the amount by which the market value of the property at the date of the transfer exceeds the value of the consideration shall be deemed to be as gift made by the transferor....'
19. There is no dispute that s. 52(1) is attracted only if -
(a) the transferee is directly or indirectly connected with the assessed, and
(b) the ITO has reason to believe that the object of the transfer is avoidance or reduction of the assessed's liability to tax on capital gains.
thereforee, where the object of the transfer is not avoidance or reductions of tax, s. 52(1) is not applicable even if as a result of the transfer a reduction or avoidance of liability is effected.
20. The question next posed is, does this principle apply also to sub-s. (2) of s. 52 of the Act If literally interpreted in isolation, it would appear not. However, if its is construed in conjunction with the other provisions and in the context where it occurs, s. 52(2) would be applicable only to cases where the actual consideration for the transfer is not fully disclosed or declared, i.e. it is understated.
21. As noticed above, this sub-section was introduced in 1964 as part of the main section dealing with 'consideration for transfer in cases of understatement'. This is indicative of the intention of the Legislature. The assurance of the Finance Minister while speaking on clause 13 of the Finance Bill in the Loka Sabha, that it was not aimed at perfectly bona fide transaction is also of significance.
22. The circular of the Central Board of Direct Taxes issued in exercise of the power under s. 119 of the Act is also in the same strain. It read :
'Section 13 of the Finance Act, 1964, had introduced a new subsection (2) in section 52 of the Income-tax Act with a view to countering evasion of tax on capital gains through the device of an understatement of the full value of the consideration received or receivable on the transfer of a capital asset.'
23. Though the circulars of the Central Board are not binding on the court, yet, in general, circulars are binding on the income-tax authorities. Through time, the Board cannot impose a burden on the taxpayer greater than what the stature provides but it can relax the rigour of the law. The Supreme Court has recognized the validity of beneficent circulars and the right of the taxpayer to enforce these and get relief even in court. [See Ellerman Lines Ltd. v. CIT : 82ITR913(SC) ]
24. The Supreme court has also in Sole Trustee, Loka Shikshana Trust v. CIT : 101ITR234(SC) , held that the statement of the finance Minister while proposing an amendment is relevant as an aid to correct interpretation. This view has been endorsed in CIT v. Cochin Chamber of Commerce and Industry : 101ITR796(SC) .
25. The fact that sub-section (2) was introduced as a part of s. 52 and not as an independent provisions also has a bearing on the intention of the legislation. The marginal note or heading of the section, indicates the intention of the Legislature though it may not control the construction : [See CIT v. Vadilal Lallubhai : 86ITR2(SC) ].
26. In view of the above, it is clear that what the Legislature intended was that the provision of s. 52(2) would apply if there was an understatement and not where the correct value of the consideration was disclosed. Section 52 is not a charging section but provides a method of computation. It has, to be read along with s. 48. Section 48 refers to the full value of the consideration received or accruing from which certain deduction are to be made. In a case which is bona fide and there is no understatement, there will be no receipt or accrual beyond the amount disclosed; as such it would be irrational and absurd to tax an amount which in no sense can be regarded as income.
27. Of course the difference between the price of transfer and the market value may amount to a pro tanto gift and be assessed to gift-tax especially in view of the extended definition of gifts in the G.T. Act.
28. This was also the view of this court in Shiv Shankar Lal's case  94 ITR 433. Despite the fact that this court held that the property transferred was agricultural land, and as such the question of the applicability of s. 52 and the mutual exclusively of the gift-tax and capital gains tax did not arises, yet it proceeded to answer these question as they had been referred.
29. With regard to s. 52, this court held that it did not apply on the facts of the case. With respect to the question of fits it held that the definition of the words 'gift' in the G.T. Act, 1958, rather than that in the Transfer of Property Act was applicable to the term used in s. 47(iii) of the Act; and to the extent the amount of difference between the market value and sale price of property sold by an assessed was treated as a gift and assessed under the G.T. Act, 1958, it was exempt from capital gains tax by virtue of s. 47(iii) of the Act.
30. Ansari J., speaking for the court, after setting out the definition of the gifts under s. 2(xii) of the G.T. Act, as including the transfer of any property deemed to be a gift under section 4, opined (p. 453 :
'The transaction in question to the extent of the amount which is sought to be assessed under section 45 of the Act has already been treated as a gift and assessed under the Gift-tax Act. The same amount is, thereforee, exempt from assessment under section 45 of the Act. We should, however, like to make it clear that the ground on which we hold that it is exempt from assessment under section 45 of the Act is not that it has already been assessed to gift-tax and this would result in doubt taxation. We cannot be agree with the view of the Tribunal that the taxation laws did not contemplate double taxation at all. The same transaction can be taxed under different taxation laws. It can be taxed twice in the hands of the same persons under the Act itself. No assessment is bad by reason only of double taxation. It is not necessary for the purposes of this case to elaborate taxation. It is not necessary for the purpose of this case to elaborate further on this point. It is sufficient for the purpose of this case to hold that the transaction is exempt from the assessment under section 45 of the Act by virtue of section 47(iii) of the Act.'
31. This is also the view of the Karnataka High Court in a very recent decision in Sanjiv K. Kudva v. CIT : 127ITR354(KAR) . After dealing with various earlier decisions, the court held that as the two legislations of the G.T. Act and I.T. Act are in pari materia and deal with the same subject-matter, the enlarged definition of the word 'gift' in the G.T. Act must be applied to the terms 'gift' in s. 47(iii) of the Act. Further, if the word 'gift' used in s. 47(iii) is given the same meaning as in the G.T. Act, which is the earlier enactment, there will be competed harmony between ss. 47 and 52 of the Act. A sale for inadequate consideration would come within the meaning of the word 'gift' and consequently attract the levy of gift-tax and be outside the purview of capital gains; where as every sale in which there is an understatement would fall within in the mischief of s. 52 and capital gains tax rather than gift-tax would be attracted. The provisions thus complement each other. The contrary view of the majority of the Full bench of the Kerala High Court in ITO v. K. P. Varghese : 91ITR49(Ker) was not accepted.
32. In K. P. Varghese's case two out of the three judges constituting the Full Bench had reversed the decision of the single judge, and held that the difference between the fair market value of a capital asset and the actual consideration received on transfer can be treated as capital gains notwithstanding the fact that the same had been assessed to G.T. Act. The scheme of the I.T. Act being different from the of G.T. Act, what is taxed under the G.T. Act is the transaction used for transaction of title whereas what is taxed under the I.T. Act is the income that accrues or arises or is deemed to accrue or arises as a result of a transfer of a capital asset. Thus understood, there was no question of double taxation.
33. Relying on the decision of the Kelarla High Court, the Andhra Pradesh High Court has in ITO v. Buragadda Satyanarayana : 106ITR333(AP) taken a similar view. The court held that the definition of 'gift' in s. 2(xii) of the G.T. Act was restricted to the purposes of that Act. The first part of the definition approximates to the definition of 'gift' in the Transfer of property Act whereas the second part creates as fiction which is made, more explicit in s. 4(1) of the G.T. Act. Thus, a transaction which is a simple sale can for the purposes of gift-tax be deemed to be a gift with regard to the difference in value. The definition in s. 2(xii) or s. 4(1) of the G.T. Act cannot be imported for the purpose of construing 'gift' occurring in s. 47(iii) of the I.T. Act as the scope are of the two Acts is different. Just because the two Acts are part of an integrated system of taxation and are administered by the dome officer, the definition in the G.T. Act cannot be taken as the meaning of 'gift' in the I.T. Act. Section 52 of the I.T. Act applies necessarily to transfers as envisaged by s. 45 which are not excluded by s. 47. The word 'gift' used in s. 47(iii) of the I.T. Act must refers to a transfer made without consideration and not a deemed gifts as per the G.T. Act. A transfer by way of gift and a transfer for consideration with an understatement of value ar two incomparable things. As on the facts it was held that there was a gross under valuation of the property the court held that the ITO was justified in applying s. 52 of the Act.
34. It is relevant to note that in Buragadda Satyanarayana's case : 106ITR333(AP) , the court held that a transfer by way of a gift and a transfer for consideration with an understatement of value are two incomparable things.
35. The matter does nor appear to be as simple as that. It would appear to me that if the transfer is not bona fide and the declared consideration is lower than the consideration received it would be a case of understatement and the provisions of s. 52 of the Act would be attracted. On the other hand, if the transfer is bona fide and the declared consideration is the actual consideration received, there would be no declaration of an understatement. In such a case, the difference between the declared consideration and the fair market value would be a gift in the common and ordinary accepted sense of the word. The part constituting the sale and the part constituting the gift being bifurcated the purchaser-done would get as a bounty the difference in the declared consideration and the fair market value. In other words, he would get something for nothing. This being the true nature of a gift as known in common palace, if a bona fide transaction is not bifurcated in this manner, then even if one rupee is all that is charged and received for a property of which the fair market value is rupees ten lakhs the revenue would contend that capital gains tax as also gift-tax would be attracted, where as if nothing is charged then only gift-tax would be attracted. This is certainly an anomalous situation. It would, thereforee, appear to us that this dichotomy is essential for a bona fide transaction.
36. We think that this conclusion also derives support from the object and intendment of the exemption in s. 47(iii) which is that transfers involving an element of bounty need not be considerd for capital gains. The situations contemplated in this clause are those in which a person effects a transfer by way of conferring a favor on another and are incompatible with an idea of relisation of any gains by such transfer. As already pointed out, there is no logical reason why capital gains should be excluded if the transferor receives no consideration at all but should be attracted when the takes a single rupee. The language of s. 47(iii) does not compel such a construction and the only meaning of the word 'under' in that clues can be 'Involving' or 'by way of : to the extent to which there is a shortfall of consideration the transfer can be said to be 'under' or common parlance and not in the sense in which it is used in the G.T. Act, or the Transfer of Property Act.
37. The Karnataka High Court in Sanjiv K. Kudva's Case  127 ITR 354 also made this distinction between bona fide and non-bona fide transactions. It held that s. 52 of the Act would apply only to cases to understatement. This is because the uses of the word 'declared' in s. 52(2) establishes that it is only when a vendor has declared a lower consideration in the deed than he had received, that the provisions of the sub-section are attracted. Where the consideration, actually received is the same as the consideration actually recorded in the sale deed, it cannot be said to be a case of understatement merely because the fair market value exceeds by 15 per cent. The actual sale consideration as it is not a case of understatement as the declared consideration is not different from the undeclared consideration. As such, the view taken by the Karnataka High Court in CIT v. M. Ranga Pai : 100ITR413(KAR) was reiterated and it was held that sub-s (2) of s. 52 applied only to cases of understatement of valuation made in the sale deed and not to cases of transfer for inadequate consideration, the latter attracting the provisions of the G.T. Act.
38. In view of the judgment of this court in Shiv Shankar Lal's case : 94ITR433(Delhi) , clearly stating that its decision is not based on the principle of double taxation, we are inclined to accept the reasoning of the Karnataka High Court in Sanjiv K. Kudva's case : 127ITR354(KAR) .
39. The decision of the Madras High Court in CIT v. P. S. Kuppuswamy : 112ITR1012(Mad) and the Madhya Pradesh High Court in CIT v. Smt. Sethani Godwaribai : 127ITR349(MP) , are also to the same effect.
40. In the present case, there is no dispute with regard to the bona fide nature of the transaction. As such it would appear that the declared consideration and the actual consideration received were the same, and there is no question of the consideration being understated.
41. In the result, the question is answered in the affirmative and in favor of the assessed. However, we make no order as to costs.
42. After the draft of the judgment had been prepared but before it was pronounced, it was brought to our notice that the very point in issue had been argued before the Supreme Court and the decision was awaited.
43. In these circumstances, we felt that it would be advisable to postpone the pronouncement of the judgment. The decision of the Supreme court in C.A. No. 412 (NT) of 1973, K. P. Varghese v. ITO disposed of on September 4, 1981 : 131ITR597(SC) , is now available.
44. Bhagwati J., speaking for the court, in an erudite judgment, after taking various factors into consideration with regard to the construction of s. 52(2) observed (p. 610 :
'If Parliament intended sub-section (2) to cover all cases where the condition of 15% difference is satisfied irrespective of whether there is understatement of consideration or not, it is reasonable to assume that Parliament would have enacted that provisions as a separate section and not pitch Forked it into section 52 with a total stranger under an inappropriate marginal note. Moreover, there is inherent evidence in sub-section (2) which suggests that the thrust of that sub-section is directed against cases of understatement of consideration. The crucial and important words in sub-section (2) ar : 'the full value of the consideration declared by the assessed'. The words 'declared' is very eloquent and reveling. It clearly indicates that the focus of sub-section (2) is on the consideration declared or disclosed by the assessed as distinguished from the consideration actually received by him and it contemplates a case where the consideration received by the assessed in respect of the transfer is not truly declared or disclosed by him is shown at a different figure.'
45. The learned judge has laid emphasis on the rule in Heydon's case  3 CO. Rep. 7 a of suppressing the mischief and advancing the remedy. In order to ascertain the intention of the Legislature the Supreme court has relied on, inter alia, the Finance Minister's speech which indicated that s. 52(2) was not aimed at perfectly bona fide transactions. It has also relied on the marginal note to appreciate the drift of the provision, as also on the circular of the CBDT dated July 7, 1964, which was issued on after the introduction of s. 52(2) as both furnishing a legitimate aid to construction as contemporanea expositio and having a binding effect on the revenue authorities. Thus, the Supreme Court has come to the conclusion that (p. 614 :
'If thereforee, the revenue seeks to bring a case within sub-section (2), it must show not only that the fir market value of the capital assets as on the date of the transfer exceeds the full value of the consideration declared by the assessed by not less than 15% of the value so declared, but also that the consideration has been understated and the assessed has actually received more than what is declared by him. There are two distinct conditions which has to be satisfied before sub-section (2) can be involved by the revenue and the burden of show in that these two condition are satisfied rests on the revenue. It is for the revenue to show that each of these two conditions is satisfied and the revenue cannot claim to have discharged this burden which lies upon it, by merely establishing that the fair market value of the capital assets as on the date do the transfer exceeds by 15% or more the full value of the consideration declared in respect of the transfer and the first conditions is, thereforee, satisfied. The revenue must go further and prove that the second condition is also satisfied. Merely by showing that the first condition is satisfied, the revenue cannot ask the court to presume that the second condition too is fulfillled, because even in a case where the first condition of 15% difference is satisfied, the transaction may be a perfectly honest and bona fide transaction and there may be no understatement of the consideration. The fulfillment of the second condition has, thereforee, to be established independently of the first condition and merely because the first condition is satisfied, no inference can necessarily follow that the second condition is also fulfillled. Each condition has got to be viewed and established independently before sub-section (2) can be invoked and the burden of doing so is clearly on the revenue.'
46. The court also felt that the interpretation canvassed for by the revenue would result in rendering s. 52(2) invalid as vocative of art. 19(1)(f) of the Constitution and thus preferred the construction which made it constitutionally valid.
47. The appeal was accordingly allowed and the judgment of the Full Bench set aside and that of the single judge (Issacs J.) restored.
48. As the conclusion arrived at by us is in consonance with the above noted decision of the Supreme Court, we now proceed to pronounce the same and answer the reference as indicated earlier.